Vale (VALE - Analyst Report)
PEG Ratio: 0.4
5-Yr Projected EPS Growth: 20.4%
Vale is a metals and mining company headquartered in Brazil. A PEG ratio of 0.4 might be tempting, but investors will probably be wise to ignore its siren call. Based on current consensus estimates, analysts project a 5% drop in earnings for 2013 and a 12% drop in 2014. And those estimates have been declining for several months. It's very unlikely that Vale can compound its earnings at an average of more than 20% from here when earnings are expected to decline this year and next.
The Bottom Line
The PEG ratio can be a useful rule of thumb for finding undervalued securities. But it should only be a starting place in that search. Don't blindly rely on those published 5-year growth rates and do your own homework!